The new tax bill has been approved by both the U.S. Senate and House and will be signed into law in the near future. This could have a significant impact on your income and taxes in 2018. It also creates the opportunity for some critical tax planning while the existing tax laws are still active. Here are some tips on changes you can make to lower your tax liability before 2017 ends.
You should consider delaying any imminent transactions that will result in gains until 2018. The tax rates across the board have been lowered and the vast majority of taxpayers will see at least some reduction in taxes. This is especially valuable if you are self-employed or own a pass-through business as the tax bill creates a new deduction for 20% of qualifying business income.
Pay Any State or Local Taxes
State and local taxes, including property taxes, will only be deductible up to $10,000 starting in 2018. The easiest way is to make sure to pay any 2017 4th quarter state estimates by December 31, 2017.
Additionally, your 2018 property taxes may already be assessed and could also be paid prior to year-end.
The standard deduction is doubled to $24,000 for joint filers and $12,000 for individual filers. As a result, a number of individuals will no longer itemize deductions, eliminating the tax benefit of charitable donations. Combine that with the higher tax rates for 2017, now is the time to give to qualified non-profit organizations to lower your tax liability while helping the organizations that you support.
For individuals that own a business, moving up the timeline for acquiring equipment to be prior to year-end will give a bigger benefit to you. The new tax plan includes a provision for bonus depreciation being increased to 100% deduction while also including used assets as qualifying purchases. This provision also takes effect for all property acquired after September 27, 2017. Just make sure the property is actually placed into service by December 31, 2017.
It is vital to stay up-to-date on how this new tax plan will impact your finances. At Malloy, Montague, Karnowski, Radosevich & Co., P.A. (MMKR), we strive to help all our clients create a solid strategy to protect their financial goals. If you are concerned about how this tax plan will affect your financial future, call our team today to schedule a consultation with one of our accountants.